Category: MSRB Rules

The Municipal Securities Rulemaking Board (MSRB) has received approval from the Securities and Exchange Commission (SEC) to amend MSRB Rule G-3, on professional qualification requirements, to establish a qualification exam for municipal advisor professionals who act in a principal capacity at their firms. Continue reading

The Municipal Securities Rulemaking Board (MSRB) has received approval from the Securities and Exchange Commission (SEC) to amend MSRB Rule G-3, on professional qualification requirements, to establish a qualification exam for municipal advisor professionals who act in a principal capacity at their firms. The MSRB says it will “pilot” the Municipal Advisor Principal Qualification Examination (Series 54) from February 2019 through June 2019. Any municipal advisor principal may take the pilot Series 54 examination during the pilot period and if that individual achieves a passing score or better, the individual will be considered qualified as a municipal advisor principal when the MSRB permanently establishes the Series 54 in the fall of 2019. Go to SolomonExamPrep.Com to be notified when Solomon Exam Prep’s Series 54 Exam Study materials are launched.

A municipal finance professional decides to donate his time to a municipal official’s campaign. He donates his time outside of work hours. Which of the following is true?

A. This would not be considered a contribution under G-37, and would not need to be disclosed and would not trigger the ban

B. This is considered a contribution that will need to be reported and may trigger the ban

C. This will need to be disclosed by the dealer, but it would not trigger the ban

D. This is considered a contribution that may trigger the ban, but will not need to be reported

Answer: A. An employee of a dealer generally can donate his or her time to a municipal official’s campaign without it being considered a contribution to the official, as long as the employee is volunteering his or her time during non-work hours, or is using previously accrued vacation time or the dealer is not otherwise paying the employee’s salary (e.g., an unpaid leave of absence). Because the volunteering takes place outside of work hours, it would not be considered a contribution and will not trigger the ban or need to be disclosed.

On August 17, 2016, MSRB Rule G-37, known as the “pay to play” rule, will be extended to apply to municipal advisors. Continue reading

On August 17, 2016, MSRB Rule G-37, known as the “pay to play” rule, will be extended to apply to municipal advisors.

The rule has two main components. First, it prohibits municipal securities dealers and municipal advisors from engaging in certain types of business with a municipality if they have made political contributions to an official of the municipality. This ban on business lasts two years from the date of the triggering contribution. Second, the rule requires municipal securities dealers and municipal advisors to disclose specific information related to political contributions.

The pay to play rule does carve out an exception for small contributions in elections by municipal finance professionals (MFPs) and municipal advisory professionals (MAPs) who are entitled to vote for an elected official. MFPs and MAPs are allowed to contribute up to $250 per election in which they are entitled to vote.

MSRB Rule G-42, Duties of Non-Solicitor Municipal Advisors, will be effective June 23, 2016, and was recently added to the outline for the Series 50 exam. Continue reading

MSRB Rule G-42, Duties of Non-Solicitor Municipal Advisors, will be effective June 23, 2016, and was recently added to the outline for the Series 50 exam.

The rule requires that municipal advisors meet certain standards of conduct in their dealings with municipal entities, which includes fulfilling two duties: a duty of care and a duty of loyalty. Though G-42 goes into great detail about municipal advisor responsibilities, the duties of care and loyalty are the basis for everything included in the rule.

In order to fulfill its duty of care, the municipal advisor must:

• Have enough knowledge and expertise to give informed advice to the municipal entity

• Reasonably inquire into all relevant facts before allowing a municipality to proceed on a particular course of action or before giving advice

• Undertake a reasonable investigation to determine that its advice is not based on materially inaccurate or incomplete information

In order to fulfill its duty of loyalty, a municipal advisor must:

• Be honest and act in good faith

• Put the municipal client’s interests before its own financial or other interests

• Not perform municipal advisory activities for the client if its conflicts of interests will prevent it from acting in the client’s best interests

The rule requires municipal advisors to put their municipal advisory relationships in writing “prior to, upon or promptly after” the relationship begins, and requires them to disclose all conflicts of interest in writing to the municipal client.

Finally, Rule G-42 provides a list of specifically prohibited activities and explains how a firm must respond if it inadvertently provides advice to a municipal entity.

The rule was written to conform to the fiduciary duty placed on municipal advisors by the Dodd-Frank Act.